Mechanics Lien

Mechanics Lien in United States

Practical Information

Note: Some of this information was last updated in 1982

See lien (in U.S. law). A person who furnishes certain kinds of labor or materials in the construction of improvements on land may, on failure of the owner of the land to pay him, acquire a lien on the land and improvements by complying with certain formalities. This is known as a mechanic’s lien, and is governed by state statutes. The statutes vary from state to state. In some states, the mechanic must have been hired by the owner of the land or his or her agent to establish the lien; in other states, the consent of the owner is sufficient. The statutes distinguish between a contractor hired by the owner to construct an improvement and a subcontractor hired by a contractor. In some states, the subcontractor’s lien is dependent upon the amount that the owner owes to the contractor (New York system); in other states, the subcontractor’s lien is a direct lien independent of the indebtedness from the owner to the contractor (Pennsylvania system). Subcontractors may be required to serve notice of their claim on the owner within a fixed time. Both contractor and subcontractor may be required to file notice of their claims within a specified time after the work is completed. Steps must be taken to enforce the lien by foreclosure (in U.S. law) within a fixed time after the claim is filed. A mechanic’s lien may be released or waived, just like a mortgage.

Priority of mortgage lien over mechanic’s lien

The state statutes vary concerning when a mechanic’s lien attaches to the land. The time it attaches is most important in determining which has priority, a mortgage lien or a mechanic’s lien. In some states, a mortgage recorded before the filing of a mechanic’s lien has priority over the lien. However, once recorded, the lien has priority over mortgage money advanced after the recordation of the lien. In other states, the mechanic’s lien attaches on the date the owner of the land orders the work to be done, and the mechanic’s lien has priority over the lien of a mortgage made after the date the work was ordered. In a majority of the states, no mechanic’s lien may attach, so far as purchasers and mortgagees are concerned, until actual commencement of the improvements.

When a mortgagee is required to advance funds for construction of a building on the land, a different rule prevails. In most states, the mortgage lien is prior to a mechanic’s lien for work or materials furnished in constructing the building. To protect the mechanic’s lien, however, the mortgagor is required under the terms of the mortgage to apply the advances first to the payment of the cost of improvement before using the funds for any other purpose.

Protection of mortgage against mechanic’s liens

To protect themselves against mechanic’s liens (particularly on construction loans), owners and mortgagees adopt various measures: a. The mortgagee may insist that the original construction contract contain a waiver (in U.S. law) of all mechanic’s liens. In some

states, this is effective and is binding on all subcontractors if the contract is recorded or the subcontractor knows of this provision at the time he furnishes the labor or material. Such a waiver is, in substance, a voluntary release or relinquishment of the lien, the contractor electing to rely solely on the personal responsibility of the party ordering the erection of the building. This arrangement hampers the contractor in obtaining credit from subcontractors.

b. The owner or mortgagee may withhold payout to the contractor of an amount ample to protect against subcontractors’ liens until the time for the giving of notice of subcontractors’ liens has expired.

c. Under some statutes, an owner or mortgagee is protected in paying out to subcontractors named on a verified list furnished by the contractor. As each payout is made to subcontractors named in the list, each subcontractor is required to furnish a lien waiver. If the general contractor claims that he or she has paid a particular subcontractor and produces the subcontractor’s lien waiver, payment may be made to the contractor, although to protect against forged waivers, the check is sometimes made payable to the contractor and subcontractor.

d. When final payment is made to the contractor, he or she is required to furnish a full lien waiver.

e. The arrangement between mortgagor and mortgagee is such that the mortgagee is obligated to pay out the loan as the work progresses.

f. A surety bond may be required by the mortgagee to protect against mechanic’s liens. In some states, the posting of the proper surety bond discharges all mechanic’s liens that have attached to the property.

g. For protection when making a loan other than a construction loan, the mortgagee inspects the premises to make sure that no recent repairs or improvements have been made, and requires an affidavit (in U.S. law) from the mortgagor that no such repair or improvements have been made or ordered. If traces of recent work are apparent, lien waivers are required.

h. Since some laws provide that the interest of owners will be subject to liens for any work done with their knowledge (even on the order of a tenant, for example) unless they post in a conspicuous place on the building a notice that they will not be responsible, some owners keep such a notice posted on their buildings at all times

(Revised by Ann De Vries)

What is Mechanics Lien?

For a meaning of it, read Mechanics Lien in the Legal Dictionary here. Browse and search more U.S. and international free legal definitions and legal terms related to Mechanics Lien.

Cause of Action to Enforce Mechanic’s Lien: an Overview

This section examines this type of action. This subject identifies the various elements of the Cause of Action to Enforce Mechanic’s Lien, offering a practical approach to the litigation issues of this cause of action. See also the entry about legal risks.


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